T6a_Operations and Sources of Fund_Actual

7/30/2019 T6a_Operations and Sources of Fund_Actual

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Islamic Banking Operations

(Sources of Fund)


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FRAMEWORK FOR PROFIT SHARING & DISTRIBUTION

SOURCES OF FUND USES OF FUND GROSS LESS COST DISTRIBUTABLE INCOME

INCOME

#

Wadiah Savings/

Students S/As

Wadiah Current Account

Mudharabah Current

Account

Mudharabah General

Investment Account

Mudharabah Special

Investment Account

Interbank

Investment

Working

Capital

BBA FinancingBBA Refinancing

Study Financing

SME Financing

Unit Trust Financing

Trade Financing

Interbank Investment

Malaysia GovernmentInvestment Certificate

Islamic Acceptance Bill

Islamic Debt Securities

Gross

Income

minus :

General Provision

Interbank

Investment Cost

Reserve Cost

Working Capital

Income

Distributable

Income

Bank

(25%)

# Less Statutory Reserve Requirements

Customer

(75%)


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OPERATIONS OF ISLAMIC BANKING WINDOWS

IN COMMERCIAL BANKS UNDER DUAL BANKING SYSTEM

CONVENT.

FUND

DIVIDEND

FOR

INVESTOR

INTEREST

TO

CUSTOMERPROFIT

FROMFINANCING

Islamic Banking

System (IBS)

CONVENTIONAL

INTEREST

INCOME FROMCUSTOMER

INTEREST FROM

MONEY MARKET

OPERATION

FUND FROM

CUSTOMER/

CAPITAL

FUNDS FROM

INVESTOR/

ENTREPRENEUR

IBS

FUNDROFIT FROMINVESTMENT


4/27

(2) TYPES OFDEPOSITS AND

INVESTMENT PRODUCTS

WadiahSavings Account

WadiahStudent Savings Account

WadiahCurrent Account

MudharabahSavings Account

MudharabahCurrent Account

MudharabahGeneral Investment Account


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COMPARISON BETWEEN

ISLAMIC AND CONVENTIONAL DEPOSITS PRODUCTS

Types of Product i) Conventional ii) Islamic

i) Conventional

a) Savings Account

b) Fixed Deposit Accountc) Current Account

ii) Islamic

a) Wadiah Savings Account

b) Mudharabah General Investment Account

c) Mudharabah Current Account

Guaranteed

Custody

Return (hibah)is at banks

discretion (Wadiah)

Profit-sharing

between bank and

customer

(Mudharabah)

Return is

fixed at the

beginning

of the contract.

Example:3.5% p.a for

Fixed Deposit

Account


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TERMS OF ACCEPTANCE OF DEPOSITS

GUARANTEED SAFEKEEPING

(WADIAH

)PROFIT SHARING INVESTMENT

(MUDHARABAH

)


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CONCEPT OF MUDHARABAH

A contract where one party provides the capital

(customer) and the other (bank) provides the

expertise in business

Profit derived from the business will be shared

based on a pre-agreed profit sharing ratio

between the customer and the bank. Loss willbe borne by the capital provider


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CONCEPT OF WADIAH

Wadiah is a contract (akad) between the owner

of the asset (customer) and the custodian (bank)

to safeguard the asset on behalf of the customer.

This is applicable to Savings and Current A/Cs

Types ofWadiah:

Wadiah Yad Amanah- Trustee Custody

Wadiah Yad Dhamanah- Guaranteed Custody


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Wadiah

Yad Amanah

TrustYad Dhamanah

Guarantee

Custodian of goods

act as trustee but notobliged to replace thegoods if accidentallylost or damaged

When:Goods are pooledtogether not segregatedCustodian utilizes thegoods in business

Custodian can imposeservice chargesOwner gives custodianconsent for use of goods


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Wadiah Yad

Amanah

Wadiah Yad

Dhamanah

CONSENT GIVEN BYWADIAHSAVINGS/CURRENT A/C CUSTOMERS

TO USE THEIR FUNDS


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Savings accounts may be opened for:-

Individuals

Minors

Joint (two or more individuals) parties

* Societies, associations and institutionsother than firms, corporations and

business enterprises

Hibah computation is based on the followings:- Principal (P) X Time (T) X Rate quoted *

Wadiah Savings A/C


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Example:

Tier Range Rate (% p.a)

Tier 1 Up to RM 1,000 1.05 %Tier 2 RM 1,001 to RM 5,000 1.85 %Tier 3 RM 5,001 and above 2.54 %

Hence compute WSA with balance of RM 7,000 for whole ofJanuary 2007 based on the above hibah rates.

31/365 X 1.05% X 1,000 = RM 0.8931/365 X 1.85% X 4,000 = RM 6.2831/365 x 2.54% x 2,000 = RM 4.31

Total hibah = RM 11.48

Multi hibah rates(effective 16/12/06-15/01/07 and 16/01/07- 15/02/07)


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Please compute hibah based on the following information ?

(effective 16/12/06-15/01/07 and 16/01/07-15/02/07)

Example:



Hence compute WSA with balance of RM 10,000 for whole ofJanuary 03 2007 based on the above hibah rates.

Exercise on Multi hibah rates


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Example:



Hence compute WSA with balance of RM 10,000 for whole ofJanuary 03 based on the above hibah rates.

31/365 X 1.15% X 1,000 = RM 0.9731/365 X 1.95% X 4,000 = RM 6.6231/365 x 2.34% x 5,000 = RM 9.94

Total hibah = RM 17.54

Multi hibah rates(effective 16/12/06-15/01/07 and 16/01/07- 15/02/07)


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Exercise on Multi hibah rates

Please compute hibah based on the following information ?

(effective 16/12/02-15/01/03 and 16/01/03-15/02/03)

Example



WSA with balance of RM 8,500 for whole of January 03 based onthe above hibah rates.


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MUDHARABAHCURRENT ACCOUNT

What Is Mudharabah Current Account ?

A current account which is based on profit

sharing concept ofMudharabah

Profits gained from investment will be sharedbetween the depositor and the bank based on a

pre-determined profit sharing ratio


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Example of dividend calculation:

Assume Islamic banking rates are as follows:-

Balance Profit Sharing

(Customer: Bank)

0 - 1,999 - 0 :1002,000 - 49,999 - 50 : 50

50,000 - 99,999 - 60 : 40

100,000 & above - 70 : 30

..cont



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Example of dividend calculation:

Assume Islamic banking rates are as follows:-

Balance 16/9/06-15/10/06 16/10/06-15/11/06

0 - 1,999 - 0 % 0 %

2,000 - 49,999 - 3.00 % 3.05 %

50,000 - 99,999 - 3.07 % 3.10 %

100,000 & above - 3.15 % 3.20 %

..cont



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Example of dividend computation:-

Assume daily balances in En Alis account are as follows formonth of October 2006 (31 days)

Date No. of days Balances

1 - 10 10 123,000

11 - 15 5 66,000

16 - 20 5 5,400

21 - 25 5 1,900

26 - 31 6 3,300

..cont



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Answer:

Date Calculation Dividend

1 - 10 123,000 x 3.15% x 10/365 = 106.15

11 - 15 66,000 x 3.07% x 5/365 = 27.76

16 - 20 5,400 x 3.05% x 5/365 = 2.26

21 - 25 no dividend (as bal.< 2,000) = 0.00

26 - 31 3,300 x 3.05% x 6/365 = 1.65

Total = 137.82



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The owner of the fund (customer) places money for a

stipulated period of time (tenor) for the purpose of

participating in the sharing of profits made from the

banks investment of funds.

MUDHARABAHGENERAL INVESTMENT ACCOUNT(MGIA)


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Tenure ranges from 1,2,3 until 60 months

Minimum amount for 1 month investment isRM5,000

Minimum amount for 3 months and aboveinvestment is RM 500

Profit sharing

75% customer : 25% bank (1 month & above)

Dividends are accrued on daily basis

FEATURES OF MGIA


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Individual below 18 years of age, the account isopened and operated in the name of a trustee.

Joint accounts are allowed for individuals.

Tenor available1,2,3 - 60 months

Minimum Placement

1 month - RM5,000-00

2-60 months - RM500-00

Statement

Receipt issued with details on amount, tenor and

profit sharing ratio.

Eligibility


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If a customer place RM10,000 in MGIA on 20/1 until 20/4, with declaredrates as below:

rates16/1 - 15/2 3.30 %16/2 - 15/3 3.25 %16/3 - 15/4 3.20 %16/4 - 15/5 3.12 %

Dividend computation RHB Bank

Based on daily accrual basis on the prevailing declared rates.

(20/1-15/2 = 27 days) 27/365 x 3.30 % x 10,000 = 24.41(16/2-15/3 = 28 days) 28/365 x 3.25% x 10,000 = 24.93

(16/3-15/4 = 31 days) 31/365 x 3.20% x 10,000 = 27.18(16/4-20/4 = 05 days) 05/365 x 3.12% x 10,000 = 04.27

Total dividend RM 80.79Other banks

Based on maturing rate.

(20/1-20/4 = 91 days) 91/365 x 3.12% x 10,000 = RM 77.79

Dividend computation compared to other banks


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En Mohd Ali placed a 6 months time deposit for RM 70,000 on December 16, 2000. Due tounforeseen circumstances, he withdrew his deposits on May 2, 2001 i.e. after the completion offive (5) months. Compute dividends payable to him based of the following dividends ratedeclared.

16/12/00 - 15/01/01 3.0 % p.a

16/01/01 - 15/02/01 3.2 % p.a

16/02/01 - 15/03/01 3.3 % p.a16/03/01 - 15/04/01 3.5 % p.a

16/04/01 16/05/01 3.3 % p.a

Dividend computation RHB Bank

Based on daily accrual basis on the prevailing declared rates.

(16/12-15/1 = 31 days) 31/365 x 3.0 % x 70,000 = 178.36

(16/01-15/2 = 31 days) 31/365 x 3.2 % x 70,000 = 190.25

(16/02-15/3 = 28 days) 28/365 x 3.3 % x 70,000 = 177.21

(16/03-15/4 = 31 days) 31/365 x 3.5 % x 70,000 = 208.08

(16/04-02/5 = 17 days) 17/365 x 3.3 % x 70,000 = 107.59

Total dividend RM 861.49

However En Mohd Ali will be paid only 75% X RM 861.49 =RM 646.12

Premature upliftment of MGIA


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The concept of MSIA is similar to MGIA i.e. the

customer places its fund for a stipulated period of

time (tenure) for the purpose ofparticipating in the

sharing of profitsmade from the banks investment of

funds.

MUDHARABAH SPECIAL INVESTMENT ACCOUNT(MSIA)


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However, the differences are as follows:

MGIA MSIA

(i) Tenure of deposits - 1, 2-60 months 28-92 days

(ii) Minimum amount - RM 5K, RM 500 RM 100K

(iii) Profit sharing ratio - Bk (25%), Cust (75%) negotiable (r = 12 mths MGIA)

MUDHARABAH SPECIAL INVESTMENT ACCOUNT(MSIA)

Documents

T6a_Operations and Sources of Fund_Actual